M/S SRI NANGALI EDUCATIONAL SOCIETY, GURDASPUR V. C.I.T (EXAMPTIONS) , CHANDIGARH

ITA 292/ASR/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3565 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-08-2019
• Assessment Year: misc
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP C HAUHAN LD
• Assessee Lawyers: P N ARORA LD
• Keywords: Set aside
• Section: 12A; 12AA; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL AMRITSAR BENCH, AMRITSA R BEFORE SH. B.R. BASKARAN, ACCOUNTANT MEMBER AN D SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.292/ASR/2017 ASSESSMENT YEAR: NIL M/S. SRI NANGALI EDUCATIONAL SOCIETY WARD-4, SRI NANGALI ACADEMICS PUBLIC SCHOOL, B.S.F. ROAD, NEAR ARORA HOSPITAL, GURDASPUR [PAN:AAEAS 2209J] VS. CIT(EXEMPTIONS) CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA (LD. ADV.) RESPONDENT BY: SH. SANDEEP CHAUHAN (LD. CIT- DR) DATE OF HEARING: 26.08.2019 DATE OF PRONOUNCEMENT: 29.10.2019 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE APPELLAN T SOCIETY AGAINST THE ORDER DATED 31.03.2017 IMPUGNED HEREIN PASSED BY THE LD. CIT(EXEMPTIONS), CHANDIGARH, U/S 12AA(1)(B)(II) OF THE I.T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WHEREBY THE LD. CIT(EXEMPTIONS) REJECTED THE APPLICATION FOR REGISTRAT ION. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT SOCI ETY HAS FILED AN APPLICATION ONLINE ON 30.09.2016 BEFORE TH E LD. CIT(E), CHANDIGARH FOR SEEKING REGISTRATION U/S 12A OF THE INCO ME TAX ACT BY DESCRIBING THE FOLLOWING AIMS AND OBJECTS OF THE SOCIETY. ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 2 THE STATED AIMS AND OBJECTS OF THE SOCIETY ARE TO ESTABLISH, TAKE OVER AND MANAGE EDUCATIONAL TECHNIC AL AND MEDICAL INSTITUTIONS; TO ORGANIZE EDUCATIONAL ACTIV ITIES; TO START AND CONDUCT EDUCATIONAL PUBLICATIONS, ISSUE PERIODI CALS OR LITERATURE PERTAINING TO THIS SPECIFIC FILED; TO DE VELOP MIND AS WELL AS PHYSIQUE OF THE CHILDREN THROUGH GAMES AND EXTRA- CURRICULAR ACTIVITIES AND CREATE PERSONALITY AND LE ADERSHIP TRAITS IN THE CHILDREN; TO START AND RUN PRIMARY AN D SECONDARY SCHOOLS, KINDER GARDEN AND MONTESSORI OR OTHER KIND S OF SCHOOLS TRAINING SCHOOL FOR TEACHERS, INSTITUTIONS FOR HIGHER EDUCATION AND EDUCATIONAL TRAINING SCHOOLS; TO AFFI LIATE WITH OR AMALGAMATE WITH EDUCATIONAL INSTITUTIONS OR SOCIETI ES WITH SIMILAR OBJECTS; TO DEVISE WAYS AND MEANS FOR THE ADVANCEMENT OF THE YOUTH IN GENERAL SPORTS AND OTHE R CULTURAL ACTIVITIES IN ORDER TO DEVELOP THEIR PERSONALITIES AND OUTLOOK OF LIFE; TO CO-OPERATE AND CO-ORDINATE WITH THE INSTIT UTIONS WORKING FOR THE ENHANCEMENT OF EDUCATION; THE SOCIETY MAY P ERFORM ALL SUCH ACTS MAY BE CONSIDERED NECESSARY OR CONDUCIVE TO THE ATTAINMENT OF THE AFORESAID OBJECT; TO RECEIVE DONA TIONS AND AIDS FROM NATIONAL AND INTERNATIONAL LEVEL ASSOCIAT IONS AND TO USE FOR THE PURPOSES FOR WHICH THEY WERE RECEIVED. THE APPLICATION OF THE APPELLANT SOCIETY WAS TAKEN INT O CONSIDERATION BY THE LD. CIT(E) WHILE ISSUING SHOW CAUSE LETTER DATED 17.01.2017 BY FIXING THE DATE ON 25.01.2017 A ND THE APPELLANT WAS ASKED TO PROVIDE CERTAIN DOCUMENTS/CLARIF ICATIONS AS MENTIONED IN PARA NO.5 OF THE ORDER, WHICH WERE REPLIED/CLARIFIED BY THE APPELLANT ON 22.03.2017. WH ILE PERUSING THE REPLY OF THE APPELLANT, IT WAS REVEALED BY THE L D. CIT(E) THAT THE APPELLANT IS RUNNING A SCHOOL IN THE NAME & STY LE OF SRI NANGALI ACADEMIC PUBLIC SCHOOL AND HAD BEEN CLAIMING EXEMP TIONS U/S ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 3 10(23C)(IIIAD) OF THE I.T. ACT TILL FINANCIAL YEAR 2013-14 AND THEREAFTER CLAIMED EXEMPTION U/S 10(23C)(VI) OF THE ACT FOR THE F.YS.2013-14 TO 2015-16 WITHOUT HAVING ANY APPROVAL BY THE PRESCRIBED AUTHORITY. THE APPELLANT HAS ALSO CLAIME D THAT IT WANTS TO COMMENCE OTHER CHARITABLE ACTIVITIES LIKE FREE EDUC ATION TO POOR STUDENTS IN FUTURE SO IT WANTS TO BE REGISTERED U/S 12AA OF THE I.T. ACT. IT WAS FURTHER REVEALED BY THE LD. CIT(E) THA T THE APPELLANT SOCIETY IS ALSO HAVING FRANCHISE AGREEMENT WITH M/S . S.K. EDUCATIONS PVT. LTD. FROM 04.04.2009 TO 03.04.2014 FOR RUNNING A PLAY SCHOOL NAMELY BACHPAN AND AS PER FRANCHISE A GREEMENT MONTHLY FEES/ CONSIDERATION AMOUNT EQUIVALENT TO FI FTEEN PERCENT OF GROSS COLLECTION EVERY MONTH IS PAYABLE BY THE APPL ICANT TO THE FRANCHISER M/S S.K. EDUCATION PVT. LTD. THEREFORE, IT WAS OBSERVED BY THE LD. CIT(E) THAT THE APPELLANT HAS DELIBERATE LY CONCEALED ITS INDULGENCE IN AN ACTIVITIES I.E. PURELY COMMERCIAL, IT IS ALSO SEEN THAT APPELLANT HAS DELIBERATELY NOT MENTIONED OR EXPLAIN ED THE RELATION WITH S.K. EDUCATIONAL PVT. LTD. IT IS ONLY AFTER BE ING ENQUIRED BY THE DEPARTMENT THAT THE APPELLANT HAS COME WITH THE EXP LANATION THAT THE APPELLANT IS ALSO RUNNING SCHOOL UNDER THE FRAN CHISE OF M/S. S.K. EDUCATION, NEW DELHI . THE LD. CIT(E) ALSO OBSERVED THAT THE EMPHASIS OF THE SOCIETY, HAS OVER THE YEARS, SHIFTE D TO ACQUIRING OF BUSES WHICH ARE IN ALL SENSES AN ADDITIONAL SOURCE OF INCOME. RE- DEPLOYMENT IN EXPANDING INFRASTRUCTURE THAT WOULD A UGMENT EDUCATION (IN THIS EXAMPLE BUILDING) IS MINISCULE. THE APPLICANT SOCIETY HAS UTILIZED ITS FUND FOR ACQUIRING BUSES/V ANS ETC. AS IS EVIDENT FROM THE FINANCIAL STATEMENTS ON RECORD AND HAS EARNED INCOME OF RS.30,43,010/- IN THE FORM OF TRANSPORTAT ION FEE DURING FINANCIAL YEAR 2015-16. FURTHER, THE INCOME RECEIVE D BY SALE OF BAGS, DRESSES, BOOKS ETC. (RS.3,71,301/- RS,1,49,397/- AN D RS.4,50104/- DURING THE YEAR 2013-14, 2014-15 & 2015-16 RESPECTI VELY) DO NOT ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 4 SUPPORT THE CHARITABLE INTENT OF THE APPLICANT FOR THE CAUSE OF PROMOTING EDUCATION AS CLAIMED AND ARE SEEN AS ATTE MPTS TO UNDERTAKE ALL SUCH ACTIVITIES THAT ARE OTHERWISE PR OVIDE ON A COMMERCIAL BASIS . THE LD. CIT(E) FURTHER OBSERVED THAT THE APPLICANT HAS RECEIVED GRANT IN AID OF RS.2 LAKH FR OM THE PUNJAB GOVT. OUT OF WHICH ONLY RS.1.15 LAKH HAS BEEN UTILI ZED DURING F.Y.2015-16. THE TRANSPORT FEE RECEIVED DURING THE F.Y. 2015-16 IS RS.30,43,010/- AND THE EXPENSES UNDER THE HEAD TRANSPORTATION CHARGES WAS RS.16,00,236/- (ALMOST 50% OF THE FEE CHARGED). THIS AGAIN EXEMPLIFIES THE PROFIT MOTIVE OF THE APPLICAN T. THE APPLICANT SOCIETY HAS BEEN CHARGING VARIOUS FEES LIKE ADMISSI ON FEE, MONTHLY FEE/ TERM FEE ETC. WHICH MAR THE ESSENCE OF CHARITY AS CLAIMED. THE OUTSTANDING UNSECURED LOAN FOR THE YEAR ENDING MAR, 2016 STANDS AT RS.92,68,174/- YET AGAIN THE APPLICANT HAS ADVANCED A LOAN OF RS.7,30,000/- TO M/S S.K. EDUCATION . THE LD. CIT(A) FINALLY OBSERVED THAT THE APPLICANT HAS TAKEN A FRANCHISE OF LIMITED COMPANY AND IT IS A WELL ESTABLISHED PRINCIPLE THAT TAKING FRANCHISE OF A CORPORATE COMPANY IS NOT EXEMPTED AS THE CHARI TABLE ACTIVITY AS PER PROVISIONS OF SEC.2(15) OF I.T. ACT. THE FRANCH ISE AGREEMENT BETWEEN THE APPLICANT AND THE SAID COMPANY IS IN TH E NATURE OF BUSINESS AND NOT OF THE CHARITY. FURTHER THE APPLIC ANT SOCIETY CLAIMED TO BE RUNNING ONLY ONE EDUCATIONAL INSTITUT E UNDER THE NAME & STYLE OF SH. NANGALI ACADEMICS PUBLIC SCHOOL BU T WHEN THE SAME WAS QUESTIONED IN ONE OF THE SPECIFIC QUERY, IT TRA NSPIRED THAT IT HAS ALSO TAKEN A FRANCHISE FOR A PLAY SCHOOL. THE APPL ICANT SOCIETY CLAIMED TO RUN ONLY ONE SCHOOL IS FOUND TO BE FALSE . ULTIMATELY THE LD. CIT(E) REJECTED THE APPLICATION FILED BY THE APPLIC ANT SOCIETY ON THE AFORESAID REASONS . ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 5 3. BEING AGGRIEVED, THE APPLICANT PREFERRED THE INSTANT APPEAL AND IN SUPPORT OF ITS CASE SUBMITTED VARIOUS DOCUMENTS INCLUDIN G AN APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT, COP Y OF CERTIFICATE OF REGISTRATION OF THE APPELLANT SOCIETY DATED 14/10/200 9 ISSUED BY ADDITIONAL REGISTRAR OF SOCIETIES, BATALA, COPY OF MEM ORANDUM OF ASSOCIATION ALONG WITH RULES AND REGISTRATION OF THE SOCI ETY, COPY OF SHOW CAUSE NOTICE DATED 17/01/2017 ISSUED BY DCIT (HQ) EXEMPTIONS, CHANDIGARH, COPY OF REPLY DATED 22/03/20 17 FILED BY THE APPELLANT SOCIETY BEFORE DCIT(HQ) EXEMPTIONS, CHANDIGAR H, COPY OF ACKNOWLEDGMENT RECEIPT W.R.TO PROOF OF HAVING FILED T HE RETURN OF INCOME BY THE APPELLANT SOCIETY FOR THE ASST. YEAR 2014- 15 AND COPY OF AUDIT REPORTS RELEVANT TO THE A.YS. 2014-15, 2015- 16 AND 2016-17. THE LD. AR ALSO FILED VARIOUS JUDGMENTS IN SUPPORT OF I TS CASE WHICH ARE ALREADY PART OF THE RECORD. 4. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ORDER UNDER CHALLENGE DOES NOT REQUIRE ANY INTERFERENCE AS THE SAME IS BASED ON LOGICAL REASONING AND IN ANY SENSE CANNOT BE TERMED AS P ERVERSE OR IMPROPER. 5. HAVING HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRST OBJECTION OF THE LD. CIT(E) IS THAT THE A PPLICANT SOCIETY HAD FRANCHISE AGREEMENT WITH M/S. S.K. EDUCATIONAL PVT. LTD. FOR RUNNING A PLAY SCHOOL NAMELY BACHPAN AND PAYING MON THLY FEES/ CONSIDERATION AMOUNT EQUIVALENT TO FIFTEEN PERCENT OF GROSS COLLECTION EVERY MONTH TO THE FRANCHISER M/S S.K. EDUCATION PVT. L TD. FOR USE OF BRAND NAME BACHPAN AND ITS LOGO, SIGN, SYMBOL, MOTTO OR SUCH OTHER MARK. TAXABILITY STATUS OF THE FRANCHISER M/S S.K . EDUCATIONS PVT. LTD. HAS NOT BEEN EXPLAINED AND THE APPLICANT SO CIETY DELIBERATELY CONCEALED ITS INDULGENCE IN AN ACTIVITY THAT IS PURELY COM MERCIAL. ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 6 FURTHER IT HAS DELIBERATELY NOT MENTIONED OR EXPLAIN ED THE RELATION WITH FRANCHISER M/S. S.K. EDUCATIONAL PVT. LTD. IT IS ONLY AFTER BEING ENQUIRED BY THE DEPARTMENT THAT THE ASSESSEE HAS COME WIT H THE EXPLANATION THAT THE ASSESSEE IS ALSO RUNNING SCHOOL UNDER THE FRANCHISE OF M/S. S.K. EDUCATION, NEW DELHI. HAVING CONSIDERED THE INSTANT GROUND OF REJECTION. DELH I HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. DELHI PUBLIC SCHOOL SOCIETY REPORTED IN 92 TAXMANN.COM 132 (D EL) DID NOT APPROVE THE REASONS FOR REJECTION OF REGISTRATION U/S 10 (23C)(VI) OF THE ACT TO THE EFFECT THAT THE ASSESSEE IS CARRYING A BUSINE SS ACTIVITY FOR PROFIT MOTIVES BY ENTERING INTO FRANCHISE AGREEMEN TS, WHEREBY, IT HAS OPENED AND IS RUNNING AROUND 120 SCHOOLS, AND THAT THESE CHARGES WERE RECEIVED BY THE ASSESSEE FOR USING THE NAME OF DELHI PUBLIC SCHOOL BY THE SATELLITE SCHOOLS IN AND OUTSIDE I NDIA AND NO SEPARATE BOOKS OF ACCOUNTS WERE MENTIONED BY THE APPELLA NT FOR THE BUSINESS ACTIVITY AS REQUIRED U/S 11(4A) OF THE ACT. TH E HONBLE DELHI HIGH COURT HAS HELD THAT THIS IS PRIMA FACIE NOT CORRECT, BECAUSE THE APPELLANT HAS MAINTAINED ACCOUNTS AUDITED IN DETAIL FOR F.YS 2000- 2001, 2003-04, 2004-05 & 2005-06. THE HONBLE HIGH CO URT FURTHER HELD IN PARA 29 OF THE SAID JUDGMENT. 29. FURTHERMORE, THE MEMORANDUM OF ASSOCIATION OF DPS SOCIETY, AS WELL AS THE JOINT VENTURE AGREEMENTS EN TERED INTO BY DPS SOCIETY WITH THE SATELLITE SCHOOLS VALIDATE THE MOTIVE OF AN EDUCATIONAL PURPOSE THAT THE ASSESSEE AIMS THROUGH ITS BUSINESS ACTIVITIES AND SUBSTANTIATE ITS CONTENTION S IS THAT REGARD. ON REVIEW OF THE ASSESSEES AUDITED ACCOUNT S, IT CAN BE OBSERVED THAT THE SURPLUSES ACCRUED BY DPS SOCIETY ARE BEING FED BACK INTO THE MAINTENANCE AND MANAGEMENT OF THE DPS SCHOOLS THEMSELVES. THIS, REAFFIRMS THE ASSESSEES ARGUMENT THAT THE USAGE OF THE GAINS ARISING OUT OF ITS AGRE EMENTS ARE ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 7 INCIDENTAL TO ITS EDUCATIONAL PURPOSE OUTLINED BY I TS OBJECTIVE OF THE ASSESSEE. THE JUDGMENT OF DELHI HIGH COURT WAS APPROVED BY THE APEX COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. DELHI PUBLIC SCHOOL SOCIETY [2018] TAXMANN.COM 80 (SC) BY RE JECTING THE SLP (CIVIL) 38347 OF 2018 FILED BY THE REVENUE DEPA RTMENT. THOUGH IN THE AFORESAID CASE, THE ASSESSEE ITSELF HAS GIVEN FRANCHISE TO THE OTHER BRANCHES HOWEVER IN THE INSTANT CASE UNDER CONSIDERATION AS PER REVENUE CASE, THE APPELLANT SOCIETY HAS TAKEN THE FRANCH ISE FROM M/S. S.K. EDUCATION PVT. LTD. AND AT THE TIME OF CONSIDERAT ION OF APPLICATION U/S 12AA OF THE ACT, THE APPLICANT HAD DELIBERATELY NOT MENTIONED OR EXPLAINED THE RELATION WITH FRANCHISE AND ON DETECTI ON BY THE DEPARTMENT, THE APPELLANT CAME FORWARD WITH ALL EXPL ANATION THAT IT IS RUNNING SCHOOL UNDER THE FRANCHISE OF M/S S.K. EDUCATION, NEW DELHI. IN VIEW OF THE JUDGMENT PASSED BY THE DELHI HIGH COUR T AND APPROVED BY THE APEX COURT, THE FRANCHISE GIVEN BY THE SOCIETY D O NOT ENTAIL REJECTION OF THE APPLICATION FOR EXEMPTION IF THE ENT ITY IS MAINTAINING ACCOUNTS SEPARATELY IN COMPLIANCE TO THE APPROPRIATE PROV ISIONS OF ACT AS APPLICABLE THERETO. HOWEVER, IN THIS CASE AS THE APPELL ANT AT THE INITIAL STAGE FAILED TO DISCLOSE THE RELEVANT FRANCHISE A GREEMENT AND RELATION WITH FRANCHISER TO THE LD. CIT(E) AND HAS AL SO NOT PRODUCED THE DETAILS QUA FRANCHISE AGREEMENT ON THE RELATION O F THE FRANCHISER, THEREFORE, THIS ISSUE REQUIRES FRESH CONSIDERATION BY THE LD. CIT(E). 5.1 THE LD. CIT(E) HAS ALSO REASONED THAT THE APPLICANT SO CIETY HAS BEEN CLAIMING EXEMPTION U/S 10(23C) (IIIAD) OF THE AC T TILL F.Y. 2013- 14, HOWEVER FROM 2013-14 AND 2015-16 CLAIMED EXEMPT ION U/S 10(23C) (VI) OF THE ACT WITHOUT HAVING ANY APPROVAL OF THE PRESCRIBED AUTHORITY. FROM THE PAPER BOOK DATED 25.06.2019 IT APPEARS THAT THE ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 8 CO-ORDINATE BENCH IN THE CASE OF APPLICANT SOCIETY ITSELF IN ITA NO.624/ASR/2016 VIDE ITS ORDER DATED 05.12.2017 DIRECT ED THE LD. CIT(E) TO GRANT REGISTRATION TO THE APPLICANT SOCIETY U /S 10(23C)(VI) OF THE ACT. THOUGH, FROM THE ORDER IT DOES NOT CLEAR FROM WHICH DATE AND FINANCIAL YEAR, THE ORDER PASSED BY THE CO-ORDINATE BE NCH SHALL BE APPLICABLE, THEREFORE, THIS ISSUE IS ALSO REQUIRES DETERMI NATION BY THE LD. CIT(E) WITH REGARD TO THE CLAIM OF THE APPELLAN T SOCIETY U/S 10(23C)(VI) OF THE ACT FOR THE F.Y. 2013-14 TO 2015 -16. 5.2 NEXT REASON FOR REJECTION IS THAT THE EMPHASIS OF THE A PPLICANT SOCIETY HAS OVER THE YEARS, SHIFTED TO ACQUIRING OF BUSE S AND AS EVIDENT FROM THE FINANCIAL STATEMENTS OF THE RECORD THAT THE A SSESSEE HAS EARNED INCOME OF RS.30,43,010/- IN THE FORM OF TRANSPO RTATION FEE DURING THE FINANCIAL YEAR 2015-16 AND THE EXPENSES UN DER THE HEAD TRANSPORTATION CHARGES WAS RS.16,00,236/- ONLY I.E. ALMO ST 50% OF THE FEES CHARGED EXEMPLIFIES THE PROFIT MOTIVE. THE HONBL E APEX COURT IN THE CASE OF QUEEN'S EDUCATIONAL SOCIETY VS. CIT [2015] 55 TAXMANN. COM.255 (SC) HAS HELD THAT WHEN SURPLUS IS PLOUGHED BACK FOR EDUCATIONAL PURPOSE, THE EDUCATIONAL INSTITUTIONS EXIST SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. TH E APEX COURT FURTHER APPROVED ACCUMULATION TO THE TUNE OF 15% OF ITS TOTAL INCOME PERTAINING TO THE RELEVANT ASSESSMENT YEAR AS PER SEC.11( 1)(A) OF THE ACT AND LAID DOWN THE FOLLOWING PRINCIPLES. 11. THUS, THE LAW COMMON TO SECTION 10(23C) (IIIAD ) AND (VI) MAY BE SUMMED UP AS FOLLOWS: (1) WHERE AN EDUCATIONAL INSTITUTION CARRIES ON THE ACT IVITY OF EDUCATION PRIMARILY FOR EDUCATING PERSONS, THE FACT THAT IT MAKES A SURPLUS DOES NOT LEAD TO THE CONCLUSION THAT IT C EASES TO EXIST SOLELY FOR EDUCATIONAL PURPOSES AND BECOMES AN INST ITUTION FOR THE PURPOSE OF MAKING PROFIT. ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 9 (2) THE PREDOMINANT OBJECT TEST MUST BE APPLIED - THE P URPOSE OF EDUCATION SHOULD NOT BE SUBMERGED BY A PROFIT MAKIN G MOTIVE. (3) A DISTINCTION MUST BE DRAWN BETWEEN THE MAKING OF A SURPLUS AND AN INSTITUTION BEING CARRIED ON 'FOR PROFIT'. N O INFERENCE ARISES THAT MERELY BECAUSE IMPARTING EDUCATION RESU LTS IN MAKING A PROFIT, IT BECOMES AN ACTIVITY FOR PROFIT. (4) IF AFTER MEETING EXPENDITURE, A SURPLUS ARISES INCI DENTALLY FROM THE ACTIVITY CARRIED ON BY THE EDUCATIONAL INSTITUT ION, IT WILL NOT BE CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES. (5) THE ULTIMATE TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER IN THE CONCERNED ASSESSMENT YEAR THE OBJECT IS TO MAKE PROFIT AS OPPOSED TO EDUCATING PERSONS. HENCE, IN VIEW OF THE LAW LAID DOWN BY THE HONBLE APE X COURT IN QUEENS EDUCATIONAL SOCIETY VS. CIT (SUPRA) THE LD. CIT (E) HAS TO DETERMINE THE QUANTUM OF THE SURPLUS AMOUNT AND ITS UT ILIZATION AND IS ALSO AT LIBERTY TO PUT ANY CONDITION IN ACCORDANCE WITH LAW FOR UTILIZATION OF THE SURPLUS AMOUNT AND/OR FIXING THE CHARGES OF BUSES/TRANSPORTATION ON CHARITABLE BASIS. 5.3 ON THE AFORESAID ANALYZATIONS AND REASONS, IT WOULD B E PROPER TO SET ASIDE THE ORDER PASSED BY THE LD. CIT(E) AND TO REM AND THE CASE TO THE FILE OF THE LD. CIT(E) FOR DECISION AFRESH WHI LE TAKING INTO CONSIDERATION THE OBSERVATION MADE ABOVE BY US AND LAW LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF QUEENS EDUCATION AL SOCIETY (SUPRA) AND DELHI PUBLIC SCHOOL SOCIETY'S CASE (SUPRA) WI THIN SIX MONTHS, SUFFICE TO SAY WHILE AFFORDING REASONABLE OPPORT UNITIES OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE SHALL CO-OPERATE WI TH THE PROCEEDINGS AND APPEAR AS AND WHEN WOULD BE REQUIRED B Y THE LD. CIT(E) AND IN CASE OF NON-CO-OPERATION BY THE ASSESSEE, TI ME LIMIT OF SIX MONTH SHALL NOT BE RESTRICTION BEFORE THE LD. CIT(E ). ITA N0.292/ASR/ 2017 SRI NANGALI EDUCATIONAL SOCIET Y VS. CIT(E) 10 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/1 0/2019. SD/- SD/- (B.R.BASKARAN) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED:29/10/2019. /PK/ PS. COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THEN CIT(APPEALS) 5. SR DR, I.T.A.T. AMRITSAR 6. GUARD FILE TRUE COPY BY ORDER